A shopper browses the bread section at a Wal-Mart store in Santa Clarita, California April 1, 2008. Already squeezed by high gasoline prices, slumping home values, a weakening job market and the possibility that the U.S. economy is in a recession, consumers have adopted a no-nonsense approach to shopping, passing over a trip to Target or a local grocery store if they can find lower prices at Wal-Mart. Picture taken April 1, 2008. (Xinhua/Reuters Photo) Photo Gallery>>>

    WASHINGTON, April 9 (Xinhua) -- U.S. economy will slide into "a mild recession" in 2008 in the face of a major financial crisis as the global economy is losing speed, according to the World Economic Outlook released by the International Monetary Fund on Wednesday.

    "The U.S. economy will tip into a mild recession in 2008 as the result of mutually reinforcing cycles in the housing and financial markets, before starting a modest recovery in 2009 as balance sheet problems in financial institutions are slowly resolved," said the report.

    Activity in western Europe is also projected to slow to well below potential, owing to trade spillovers, financial strains, and negative housing cycles in some countries, it said.

    By contrast, growth in emerging and developing economies is expected to ease modestly but remain robust in both 2008 and 2009.

    "The slowdown reflects efforts to prevent overheating in some countries as well as trade and financial spillovers and some moderation in commodity prices," said the report.

    The global economy is projected to slow to 3.7 percent in 2008,0.5 percentage point lower than at the time of the January World Economic Outlook Update and 1.25 percentage points lower than the growth recorded in 2007.

    The largest downward revisions to growth are in the United States, which is now expected to grow at 0.5 percent in 2008. Japan, the world's second-largest economy, is poised to slow to pace of 1.4 percent this year with little improvement at 1.5 percent in 2009.

    The IMF has also cut its growth forecast for Canada from 1.8 percent to 1.3 percent. The euro zone is expected to post growth of 1.4 percent in 2008, down from the 1.5 percent forecast earlier.

    "The overall balance of risks to the short-term global growth outlook remains tilted to the downside," said the report, noting the IMF staff now sees a 25 percent chance that global growth will drop to 3 percent or less in 2008 and 2009 -- equivalent to a global recession.

    The greatest risk comes from the still-unfolding events in financial markets, particularly the potential for deep losses on structured credits related to the U.S. subprime mortgage market and other sectors to seriously impair financial system balance sheets and cause the current credit squeeze to mutate into a full-blown credit crunch, said the report.

    Interaction between negative financial shocks and domestic demand, particularly through the housing market, remains a concern for the United States and to a lesser degree for western Europe and other advanced economies, said the report.

    Policymakers around the world are facing "a diverse and fast-moving set of challenges," and although each country's circumstances differ, in an increasingly multipolar world it will be essential to meet these challenges broadly, taking full account of cross-border interactions, the IMF warned in the report, which published twice a year.

    In the advanced economies, the pressing tasks are dealing with financial market dislocations and responding to downside risks to growth -- but policy choices should also take into account inflation risks and longer-term concerns, said the report.

    Meanwhile, many emerging and developing economies still face the challenge of ensuring that strong current growth does not drive a buildup in inflation or vulnerabilities, but they should be ready to respond to slowing growth and more difficult financing conditions if the external environment deteriorates sharply, the report noted.

    China's growth would continue its fast expansion in 2008 and 2009 from its very high rate in 2006. It is expected to increase 9.3 percent in 2008 and 9.5 percent in 2009.

    India is expected to expand 7.9 percent this year and 8.0 percent next year. Russia would continue to grow robustly at 6.8 percent this year and moderate to 6.3 percent next year.

    The Washington-based agency also warned policymakers should cooperate to deal with the challenges, stressing "broadly based efforts to deal with global challenges have become indispensable."

    "Providing fiscal stimulus across a broad group of countries that would benefit from stronger aggregate demand could prove much more effective than isolated efforts, given the inevitable cross-border leakages from added spending in open economies," said the analytical report.

    "It is still early to launch such an approach, but it would be prudent for countries to start contingency planning to ensure a timely response in the event that such support becomes necessary," the report added.

U.S. Fed auctions another $50 bln to banks

    WASHINGTON, April 8 (Xinhua) -- The U.S. Federal Reserve said Tuesday it auctioned 50 billion U.S. dollars in short-term loans to cash-strapped banks on Monday to combat a persistent credit crunch.

    This was the central bank's ninth auction aimed at injecting more money into the U.S. banking system since mid-December 2007, when the Fed established its Term Auction Facility to deliver short-term funds to banks that are in need of liquidity.   Full story

U.S. economy grew a dismal 0.6 percent in final quarter of 2007

    WASHINGTON, March 27 (Xinhua) -- The U.S. economy grew at an annual rate of just 0.6 percent in the final quarter of 2007, down sharply from the brisk 4.9 percent pace in the previous quarter, the Commerce Department reported Wednesday.

    The newly released reading, which was unchanged from an initial estimate a month ago, underscored how much momentum the economy has lost, analysts say.

    The economy grew 2.2 percent for all of last year, the worst showing since 2002.   Full story

Paulson: U.S. economy "has slowed way down"

U.S. Treasury Secretary Henry Paulson listens to remarks by President George W. Bush at the U.S. Hispanic Chamber of Commerce at the Ronald Reagan Building and International Trade Center in Washington March 12, 2008.(Xinhua/Reuters Photo) Photo Gallery>>>

    BEIJING, March 17 (Xinhuanet) -- The White House will "do what it takes" to stabilize chaotic markets and minimize the economic damage, Treasury Secretary Henry Paulson said Sunday.

    All eyes now are on Wall Street as leading financial advisers prepared for a Monday meeting with President George W. Bush and the Federal Reserve weighs another deep interest rate cut Tuesday to stem even more deterioration.  Full story